Putnam
Voyager
Fund II
SEMIANNUAL REPORT
June 30, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "When blue-chips soared, stocks of small companies sagged. But when
the smoke clears and the next market cycle takes over, the small caps
may finally have their day."
-- Forbes, May 5, 1997
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
12 Portfolio holdings
23 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
The market for stocks of small and medium-sized companies enjoyed much
brighter prospects at the midpoint of 1997 than it did when the year began.
Putnam Voyager Fund II, whose fiscal year coincides with the calendar year,
thus enters the second half with a management team in an optimistic frame of
mind.
Anything can happen between now and December 31, of course, so your managers
are leaving nothing to chance. While they agree with many other market
watchers that the small and midsize companies in which the fund typically
invests may be poised for a significant recovery, they know there can be no
guarantees. Thus they continue to place heavy emphasis on the role of
individual stock selection in the fund's results.
In the following report, the team discusses the performance and prospects of
several of these portfolio holdings as it looks back on the first half of
fiscal 1997 and moves into the second half.
Respectfully yours,
/S/George Putnam
George Putnam
Chairman of the Trustees
August 20, 1997
Report from the Fund Managers
Charles H. Swanberg
Roland W. Gillis
Robert R. Beck
After a challenging start, Putnam Voyager Fund II reached the midpoint of its
fiscal year on a much brighter note. When fiscal 1997 began, the stocks of
small and midsize companies -- those in which your fund primarily invests --
had been underperforming for some time. The first four months of the semiannual
period brought more of the same. The U.S. market's "bigger-is-better" sentiment
continued to dominate and investors favored the stocks of large, established
companies over growth oriented small-company stocks.
Beginning in May, however, a rebound began. In fact, just after the close of
the semiannual period on June 30, 1997, two small-company market indexes, the
NASDAQ Composite and the Russell 2000, hit record highs. This turnaround in
small-company stocks also boosted the performance of your fund. In conjunction
with the continued strength of the fund's large-company holdings, the small-
and mid-cap portions of the portfolio began to make up for earlier losses. For
complete performance information, please refer to the performance section that
begins on page 9.
* TECHNOLOGY HOLDINGS STRENGTHEN LATE IN PERIOD
Although volatility throughout the technology sector continued during the
first half of the fiscal year, some of the fund's holdings in this area
nevertheless proved profitable. One example is the stock of Baan Company,
which provides business management software to more than 2,300 companies. The
company's recent strong revenues resulted from larger deals, growth in
software licenses, and improvements in its pricing structure.
Computer Associates International, Inc., another software company, and Applied
Materials, a semiconductor producer, were also strong, especially during the
latter half of the period, when these industries began to recover from earlier
losses. Another rebounding technology stock during the period was that of
Cisco Systems, Inc., a networking company. Cisco's competitive position and
financial performance have been improving following a restructuring and the
introduction of several new products. While these holdings, along with others
discussed in this report, were viewed favorably at the end of the fiscal
period, all those still held are subject to review and adjustment in
accordance with the fund's investment strategy and may vary in the future.
* YEAR 2000 ISSUE BOOSTS BUSINESS SERVICES HOLDINGS
The Year 2000 issue -- or Y2K -- continues to present some of the most dynamic
opportunities within the technology and business services industries. Y2K
refers to glitches that may result from computer systems that are not
programmed to recognize the year 2000 and instead will mistake it for the year
1900. Companies around the world are struggling to prevent the loss of
essential data, applications, and even hardware within systems that are not
equipped to digest dates after December 31, 1999.
Each company faces a unique set of challenges that must be addressed from a
business as well as a technological viewpoint. However, in most cases the
response is to reprogram existing systems, to replace outdated software and
hardware, or to customize a solution that combines both approaches. Companies
that help businesses develop solutions for this problem continue to be a focal
point in your fund's portfolio.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Computer software 12.1%
Retail 8.1%
Financial services 5.8%
Business services 5.5%
Pharmaceuticals
and biotechnical 4.7%
Footnote reads:
*Based on net assets of 6/30/97. Holdings will vary over time.
Keane, Inc., for example, provides software design, development, and
management services for corporations and health-care facilities. Demand for
Keane's Year 2000 expertise has been so significant that the company has
developed a separate organization, called Resolve 2000, to support its work in
this area. Keane recently participated in a national Year 2000 conference and
is already committed to more than 250 projects relating to this issue. As a
well-established company with expertise in application development,
outsourcing, and integration services, Keane is expected to remain a major
player in the technology industry long after Y2K issues are resolved. During
the latter half of the period, we increased the fund's holdings in
Whittman-Hart, Inc., Gartner Group, and CBT Group -- all of which are involved
with Year 2000 projects.
* SMALL-CAP STOCKS BEGIN TO SHOW NEW STRENGTH; LARGE-CAPS CONTINUE TO EXCEL
Some of the small-company stocks in your fund's portfolio are worth noting.
Fastenal Company, for example, sells threaded fasteners and other industrial
and construction supplies through stores in the United States and Canada.
Recent increases in Fastenal's revenues have come from increased sales, the
addition of new stores, and the introduction of new product lines. During its
second 1997 quarter, the company opened 48 new sites, bringing its total to
576.
Throughout the first half of fiscal '97, investors continued to be amazed by
the outstanding -- and often record-breaking performance -- of large-company
stocks. The Standard & Poor's 500(registered trademark) Index, which is
weighted in favor of large companies, returned an incredible 34.68% for the 12
months ended June 30, 1997, while the Dow Jones Industrial Average was
approaching the once-unimaginable 8000 mark by early July. It is this type of
environment that demonstrates the importance of your fund's flexibility.
Because a portion of fund assets is invested in large-company stocks, we were
able to take advantage of this powerful segment and offset some of the losses
in the fund's smaller-company holdings.
One of the stellar performers in large-company portion of the portfolio was
American Express Co. In addition to its growing worldwide business and greater
distribution fees, the company is also expected to benefit from a
reorganization of some of its business units in an effort to streamline
operations. America Online (AOL), also a large-company stock, was another
strong contributor to performance. The company provides services such as
Internet access, electronic mail, and on-line news, weather, sports, and stock
quotations. While AOL was hurt by increased network and equipment costs, it
benefited from a growing number of subscribers and increased advertising
revenues. The strengthening performance of AOL reflects a general trend among
Internet stocks -- which went through a rough period during the past year as
investors questioned their earnings potential.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
American Express Co.
Financial services
Costco Companies, Inc.
Retail
Federal Home Loan Mortgage Corp.
Finance
Baan Co., N.V. (Netherlands)
Computer software
Clear Channel Communications, Inc.
Broadcasting
Starbucks Corp.
Retail
Microsoft Corp.
Computer software
Computer Associates Intl., Inc.
Computer software
America Online, Inc.
Computer services
EMC Corp.
Computer equipment
Footnote reads:
These holdings represent 12.5% of the fund's net assets as of 6/30/97.
Portfolio holdings will vary over time.
Also bringing strength to the portfolio was Novartis, a Swiss pharmaceutical
company formed by the recent merger of Ciba-Geigy and Sandoz AG. Novartis
researches, develops, manufactures, and markets innovative prescription drugs.
Among its products are treatments for central nervous system disorders, organ
transplantation, cardiovascular diseases, and arthritis. United Healthcare
Corp., the largest for-profit HMO holding company in the United States, is
also one of your fund's holdings. The company's recent improving revenues are
partly the result of growing enrollments.
* A MORE POSITIVE OUTLOOK FOR REMAINDER OF FISCAL '97
As we begin the second half of the fiscal year, we are optimistic in our
outlook for small and midsize companies. While large companies may be reaching
cyclical peaks, we believe that investors may turn to smaller companies as
their earnings growth rates improve. Regardless of the economic environment,
however, we will continue to focus on attractive companies with the potential
for significant long-term growth.
The views expressed here are exclusively those of Putnam Management. They are
not meant as investment advice. Although the described holdings were viewed
favorably as of 6/30/97, there is no guarantee the fund will continue to hold
these securities in the future. This fund invests a portion of its assets in
small to medium-sized companies. Such investments increase the risk of greater
price fluctuations.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Voyager Fund II is designed for investors aggressively seeking capital
appreciation primarily through common stocks.
TOTAL RETURN FOR PERIODS ENDED 6/30/97
Class A Class B Class M
(inception date) (4/14/93) (10/2/95) (10/2/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months 9.03% 2.73% 8.66% 3.66% 8.82% 5.01%
- ------------------------------------------------------------------------------
1 year 6.02 -0.06 5.23 0.23 5.47 1.76
- ------------------------------------------------------------------------------
Life of fund 117.56 105.03 110.84 108.84 113.15 105.74
Annual average 20.28 18.59 19.38 19.11 19.69 18.69
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS
ENDED 6/30/97
Standard & Poor's Consumer
500 Index Price Index
- ------------------------------------------------------------------------------
6 months 20.60% 1.07%
- ------------------------------------------------------------------------------
1 year 34.68 2.30
- ------------------------------------------------------------------------------
Life of fund 123.30 11.32
Annual average 21.26 2.61
- ------------------------------------------------------------------------------
Returns for class A and class M shares reflect the current maximum initial
sales charges of 5.75% for class A shares and 3.50% for class M shares.
One-year and life of fund returns for class B shares reflect the
applicable contingent deferred sales charges (CDSC), which is 5% in the
first year, declines each year to 1% in the sixth year, and is eliminated
thereafter. Returns shown for class B and class M shares for periods prior
to their inception are derived from the historical performance of class A
shares, adjusted to reflect both the initial sales charge or CDSC, if any,
currently applicable to each class and, in the case of class B and class M
shares, the higher operating costs applicable to such shares. All returns
assume reinvestment of distributions at NAV and represent past performance;
they do not guarantee future results. Investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 6/30/97
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number)
- ------------------------------------------------------------------------------
Income -- -- --
- ------------------------------------------------------------------------------
Capital gains -- -- --
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
12/31/96 $15.51 $16.46 $15.36 $15.42 $15.98
- ------------------------------------------------------------------------------
6/30/97 16.91 17.94 16.69 16.78 17.39
- ------------------------------------------------------------------------------
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales and a higher 12b-1 fee than
class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the maximum 5.75% sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B shares and assumes redemption at the end of the
period. Your fund's CDSC declines from a 5% maximum during the first year
to 1% during the sixth year. After the sixth year, the CDSC no longer
applies.
COMPARATIVE BENCHMARKS
Standard & Poor's 500 Composite Stock Price Index is an index of common
stocks frequently used as a general measure of stock market performance.
Performance results assume reinvestment of all distributions and interest
payments and do not take in account brokerage fees or taxes. Securities in
the fund do not match those in the index and performance of the fund will
differ. It is not possible to invest directly in an index.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
<TABLE>
<CAPTION>
Portfolio of investments owned
June 30, 1997 (Unaudited)
COMMON STOCKS (97.6%) *
NUMBER OF SHARES VALUE
<S> <C> <C> <C>
Advertising (1.7%)
- ------------------------------------------------------------------------------------------------------------
56,366 Lamar Advertising Co. + $ 1,437,333
92,543 Omnicom Group Inc. 5,702,891
126,050 Outdoor Systems, Inc. + 4,821,413
51,104 TMP Worldwide Inc. + 1,239,272
48,500 Universal Putdoor Holdings, Inc. + 1,691,438
--------------
14,892,347
Aerospace and Defense (0.4%)
- ------------------------------------------------------------------------------------------------------------
32,600 Boeing Co. 1,729,838
7,400 Lockheed Martin Corp. 766,363
15,000 Northrop Grumman Corp. 1,317,188
--------------
3,813,389
Alcoholic Beverages (0.1%)
- ------------------------------------------------------------------------------------------------------------
25,700 Seagram Co., Ltd. 1,034,425
Apparel (1.0%)
- ------------------------------------------------------------------------------------------------------------
52,430 Gucci Group (Italy) 3,375,181
101,607 St. John Knits, Inc. 5,486,778
--------------
8,861,959
Automotive (0.9%)
- ------------------------------------------------------------------------------------------------------------
122,680 Budget Group, Inc. (Japan) + 4,232,460
48,200 Echlin, Inc. 1,735,200
52,400 Snap-On Inc. 2,063,250
--------------
8,030,910
Banks (2.3%)
- ------------------------------------------------------------------------------------------------------------
42,600 Banc One Corp. 2,063,438
72,800 BankAmerica Corp. 4,700,150
2,000 BankBoston Corp. 144,125
15,000 Barnett Banks, Inc. 787,500
41,500 Citicorp 5,003,344
55,200 NationsBank Corp. 3,560,400
60,600 Washington Mutual, Inc. 3,620,850
--------------
19,879,807
Basic Industrial Products (0.4%)
- ------------------------------------------------------------------------------------------------------------
38,900 American Standard Companies, Inc. + 1,740,775
8,600 Cooper Industries, Inc. 427,850
39,500 General Signal Corp. 1,723,188
--------------
3,891,813
Broadcasting (3.2%)
- ------------------------------------------------------------------------------------------------------------
35,318 Chancellor Broadcasting Corp. Class A + 1,412,720
172,409 Clear Channel Communications, Inc. + 10,603,154
119,085 Evergreen Media Corp. Class A + 5,314,168
5,500 Heftel Broadcasting Corp. Class A + 303,875
84,184 Jacor Communications, Inc. + 3,220,038
34,343 LIN Television Corp. + 1,515,385
31,900 SFX Broadcasting, Inc. Class A + 1,345,781
43,383 Sinclair Broadcast Group, Inc. Class A + 1,339,450
27,800 Univision Communications Inc. Class A + 1,087,675
29,466 Westwood One, Inc. + 950,279
22,200 Young Broadcasting Corp. Class A + 721,500
--------------
27,814,025
Building Products (0.4%)
- ------------------------------------------------------------------------------------------------------------
42,200 Lowe's Cos., Inc. 1,566,675
37,100 Masco Corp. 1,548,925
--------------
3,115,600
Business Services (5.5%)
- ------------------------------------------------------------------------------------------------------------
35,000 Abacus Direct Corp. + 1,137,500
43,000 Affiliated Computer Services, Inc. Class A + 1,204,000
80,000 Airgas, Inc. + 1,585,000
98,037 Cellular Technical Services 894,588
93,825 Corestaff, Inc. + 2,533,275
337,242 Corporate Express, Inc. + 4,868,931
113,535 Gartner Group Inc. Class A, + 4,080,164
48,270 Interim Services Inc. + 2,148,015
103,450 Interpublic Group Cos. Inc. 6,342,778
99,750 Metromedia International Group, Inc. + 1,259,344
227,433 Officemax, Inc. + 3,283,564
2 Paychex, Inc. 57
43,005 Pharmaceutical Product Development, Inc. + 946,110
33,500 Precision Response Corp. + 552,750
1,877,840 Rentokil Group PLC (United Kingdom) 6,594,756
10,300 Reuters Holdings PLC ADR (United Kingdom) 648,900
75,256 Robert Half International, Inc. + 3,541,736
31,400 Select Appointments Holdings PLC ADR
(United Kingdom) 486,700
75,439 Serco Group PLC (United Kingdom) 883,947
6,300 Snyder Communications, Inc. + 169,706
33,200 Staff Leasing, Inc. + 622,500
65,700 TeleTech Holdings Inc. + 1,724,625
53,257 The Registry, Inc. + 2,449,822
--------------
47,958,768
Cable Television (0.9%)
- ------------------------------------------------------------------------------------------------------------
35,575 Tele-Comm Liberty Media Group, Inc. Class A + 844,906
460,200 Tele-Communications Class A + 6,845,475
--------------
7,690,381
Chemicals (0.9%)
- ------------------------------------------------------------------------------------------------------------
22,200 Air Products & Chemicals, Inc. 1,803,750
12,000 Betz Laboratories, Inc. 792,000
19,300 Great Lakes Chemical Corp. 1,010,838
25,400 Praxair, Inc. 1,422,400
34,400 Raychem Corp. 2,558,500
19,300 Witco Chemical Corp. 732,194
--------------
8,319,682
Computer Equipment (1.8%)
- ------------------------------------------------------------------------------------------------------------
258,452 EMC Corp. + 10,079,628
26,300 Hewlett-Packard Co. 1,472,800
31,100 Newbridge Networks Corp. (Canada) + 1,352,850
61,661 Splash Technology Holdings, Inc. + 2,227,504
17,608 Western Digital Corp. + 556,853
--------------
15,689,635
Computer Services (4.2%)
- ------------------------------------------------------------------------------------------------------------
181,302 America Online, Inc. + 10,084,924
21,756 CBT Group PLC ADR (Ireland) + 1,373,348
83,470 Computer Management Sciences + 1,711,135
103,200 ECsoft Group PLC ADR (United Kingdom) + 1,444,800
91,300 Getronics Electric N.V. (Netherlands) + 2,951,168
96,200 IDT Corp. + 769,600
133,626 Keane, Inc. + 6,948,552
2,600 Metromail Corp. + 64,350
26,300 NCR Corp. + 782,425
85,604 Renaissance Solutions, Inc. + 3,167,348
14,800 Sabre Group Holdings Inc. + 401,450
191,555 Sterling Commerce, Inc. + 6,297,371
40,080 Whittman-Hart, Inc. + 1,127,250
--------------
37,123,721
Computer Software (12.1%)
- ------------------------------------------------------------------------------------------------------------
50,000 Aspect Development, Inc. + 1,303,125
161,550 Baan Co., N.V. (Netherlands) + 11,126,756
158,525 BMC Software, Inc. + 8,778,322
101,642 Citrix Systems, Inc. + 4,459,543
187,490 Computer Associates Intl., Inc. 10,440,849
150,400 Compuware Corp. + 7,181,600
156,200 CUC International, Inc. + 4,031,913
151,885 Discreet Logic, Inc. + 2,506,103
65,822 Electronic Arts, Inc. + 2,213,265
139,738 Electronics for Imaging, Inc. + 6,602,621
37,400 Geoworks + 217,388
2,800 Great Plains Software, Inc. + 75,600
92,074 HNC Software, Inc. + 3,510,321
59,140 Komag, Inc. + 968,418
45,677 Lernout & Hauspie Speech Products N.V. (Belgium) + 1,250,408
40,100 McAfee Associates, Inc. + 2,531,313
82,838 Microsoft Corp. + 10,468,652
170,799 Parametric Technology Corp. + 7,269,632
13,000 PeopleSoft, Inc.+ 685,750
36,000 Remedy Corp. + 1,440,000
68,910 Security Dynamics Technologies, Inc. + 2,541,056
150,000 SEMA Group PLC (United Kingdom) + 3,077,060
90,000 Siebel Systems, Inc. + 2,902,500
184,600 Smallworldwide PLC ADR (United Kingdom) + 3,138,200
74,830 Synopsys, Inc. + 2,750,003
87,200 Vantive Corp. + 2,463,400
47,666 Viasoft, Inc. + 2,419,050
--------------
106,352,848
Consumer Non Durables (0.4%)
- ------------------------------------------------------------------------------------------------------------
31,954 Luxottica Group SPA ADS (Italy) 2,166,881
19,509 Moebel Walther AG (Germany) 1,141,335
--------------
3,308,216
Consumer Products (0.3%)
- ------------------------------------------------------------------------------------------------------------
1,850 Gillette Co. 175,288
52,100 Kimberly-Clark Corp. 2,591,975
--------------
2,767,263
Consumer Services (0.2%)
- ------------------------------------------------------------------------------------------------------------
54,602 Fine Host Corp. + 1,719,963
Cosmetics (0.1%)
- ------------------------------------------------------------------------------------------------------------
38,052 Thermolase Corp. + 535,106
Education Services (1.5%)
- ------------------------------------------------------------------------------------------------------------
207,618 Apollo Group, Inc. Class A + 7,318,535
81,039 DeVRY, Inc. + 2,188,053
23,100 Learning Tree International, Inc. + 1,025,063
10,000 Strayer Education, Inc. 380,000
71,501 Sylvan Learning Systems, Inc. + 2,431,034
--------------
13,342,685
Electric Utilities (0.5%)
- ------------------------------------------------------------------------------------------------------------
115,652 CalEnergy, Inc. + 4,394,776
Electronic Components (0.6%)
- ------------------------------------------------------------------------------------------------------------
66,624 Benchmarq Microelectronics, Inc. + 1,149,264
40,228 Micrel, Inc. + 2,051,628
60,100 Sipex Corp. + 2,178,625
--------------
5,379,517
Electronics and Electrical Equipment (3.7%)
- ------------------------------------------------------------------------------------------------------------
69,900 ADT Ltd. + 2,306,700
15,190 Cymer, Inc. + 740,513
65,754 DBT Online, Inc. + 3,534,278
15,900 General Electric Co. 1,039,463
98,562 Genrad, Inc . + 2,229,965
43,500 Motorola, Inc. 3,306,000
35,457 Solectron Corp. + 2,484,206
160,216 Thermo Instrument Systems, Inc. + 4,886,588
144,700 ThermoQuest Corp. + 2,206,675
405,840 Westinghouse Electric Corp. 9,385,050
--------------
32,119,438
Energy-Related (1.2%)
- ------------------------------------------------------------------------------------------------------------
25,154 AES Corp. + 1,779,646
264,313 Thermo Electron Corp. + 9,085,759
--------------
10,865,405
Entertainment (0.3%)
- ------------------------------------------------------------------------------------------------------------
31,157 Disney (Walt) Productions, Inc. 2,500,349
Environmental Control (1.1%)
- ------------------------------------------------------------------------------------------------------------
30,600 Browning-Ferris Industries, Inc. 1,017,450
129,396 Philip Services Corp. (Canada) + 2,054,162
78,563 Republic Industries, Inc. + 1,954,255
15,700 United Waste Systems, Inc. + 643,700
95,857 USA Waste Services, Inc. + 3,702,477
--------------
9,372,044
Financial Services (5.8%)
- ------------------------------------------------------------------------------------------------------------
178,682 American Express Co. 13,311,809
29,600 Associates First Capital Corp. 1,642,800
326,040 Federal Home Loan Mortgage Corp. 11,207,625
230,350 Federal National Mortgage Association 10,049,019
50,936 FIRSTPLUS Financial Group, Inc. + 1,731,824
4,950 Marschollek, Lautenschlaeger und Partner AG
(Germany) 1,186,751
148,876 MBNA Corp. 5,452,584
50,600 Metris Companies Inc. + 1,660,313
93,745 TCF Financial Corp. 4,628,659
--------------
50,871,384
Food and Beverages (0.8%)
- ------------------------------------------------------------------------------------------------------------
84,180 Archer Daniels Midland Co. 1,978,230
77,500 PepsiCo, Inc. 2,911,094
40,000 Sara Lee Corp. 1,665,000
28,900 Whitman Corp. 693,600
--------------
7,247,924
Gas Pipelines (0.3%)
- ------------------------------------------------------------------------------------------------------------
27,500 El Paso Natural Gas Co. 1,512,500
26,600 Sonat, Inc. 1,363,250
--------------
2,875,750
Gas Utilities (0.3%)
- ------------------------------------------------------------------------------------------------------------
44,500 Columbia Gas System, Inc. 2,903,625
Health Care Services (2.5%)
- ------------------------------------------------------------------------------------------------------------
30,000 ABR Information Services, Inc. + 870,000
80,200 Carematrix Corp. + 1,979,938
74,243 HBO & Co. 5,113,487
107,992 HEALTHSOUTH Corp. + 2,693,051
100,444 MedPartners, Inc. + 2,172,102
19,400 Total Renal Care Holdings, Inc. + 779,638
161,526 United Healthcare Corp. 8,399,352
--------------
22,007,568
Hospital Management (0.6%)
- ------------------------------------------------------------------------------------------------------------
117,694 Health Management Assoc., Inc. + 3,354,279
53,530 National Surgery Centers, Inc. + 1,893,624
--------------
5,247,903
Household Products (0.9%)
- ------------------------------------------------------------------------------------------------------------
151,872 Blyth Industries, Inc. + 5,125,680
69,800 Tupperware Corp. 2,547,700
--------------
7,673,380
Insurance (1.2%)
- ------------------------------------------------------------------------------------------------------------
28,200 Aetna Inc. 2,886,975
17,500 AFLAC Inc. 826,875
43,000 American General Corp. 2,053,250
11,100 American International Group, Inc. 1,658,063
17,400 AON Corp. 900,450
5,000 CIGNA Corp. 887,500
23,400 Conseco Inc. 865,800
29,700 USF&G Corp. 712,800
--------------
10,791,713
Leisure (1.3%)
- ------------------------------------------------------------------------------------------------------------
102,867 Adidas AG 144A ADS (Germany) 5,606,252
169,916 Signature Resorts, Inc. + 5,872,722
--------------
11,478,974
Lodging (1.6%)
- ------------------------------------------------------------------------------------------------------------
40,274 Doubletree Corp. + 1,656,268
142,783 Extended Stay America, Inc. + 2,248,832
123,007 HFS, Inc. + 7,134,406
15,000 Hilton Hotels Corp. 398,438
66,600 Prime Hospitality Corp. + 1,315,350
43,900 Promus Hotel Corp. + 1,701,125
--------------
14,454,419
Medical Management Services (1.1%)
- ------------------------------------------------------------------------------------------------------------
75,147 Pediatrix Medical Group, Inc. + 3,442,672
173,658 Phycor, Inc. + 5,980,347
--------------
9,423,019
Medical Supplies and Devices (3.7%)
- ------------------------------------------------------------------------------------------------------------
17,200 Bard (C.R.), Inc. 624,575
118,663 Cytyc Corp. + 3,218,734
33,000 Henry Schein, Inc. + 1,031,250
126,458 Johnson & Johnson 8,140,734
70,000 Lifecore Biomedical, Inc. + 962,500
19,189 Medtronic, Inc. 1,554,309
53,400 Minimed, Inc. + 1,421,775
45,433 Omnicare, Inc. 1,425,460
55,857 Physician Sales & Service, Inc. + 1,061,283
190,540 Stryker Corp. 6,645,083
5,800 Sybron International Corp. + 231,275
169,199 Thermo Cardiosystems, Inc. + 4,399,174
25,300 Thermotrex Corp. + 630,919
4,800 Trex Medical Corp. + 60,000
29,300 U.S. Surgical Corp. 1,091,425
--------------
32,498,496
Metals and Mining (0.2%)
- ------------------------------------------------------------------------------------------------------------
43,000 Freeport-McMoRan Copper & Gold Co., Inc. Class A 1,257,750
49,640 Miller Industries, Inc./Tennessee + 794,240
--------------
2,051,990
Networking Equipment (0.2%)
- ------------------------------------------------------------------------------------------------------------
25,700 Cisco Systems, Inc. + 1,725,113
Nursing Homes (0.7%)
- ------------------------------------------------------------------------------------------------------------
100,008 Assisted Living Concepts Inc. + 2,762,721
42,096 Health Care & Retirement Corp. + 1,404,954
65,147 Sunrise Assisted Living, Inc. + 2,280,145
--------------
6,447,820
Office Equipment (0.9%)
- ------------------------------------------------------------------------------------------------------------
282,297 Viking Office Products, Inc. + 5,363,643
36,400 Xerox Corp. 2,871,050
--------------
8,234,693
Oil and Gas (2.0%)
- ------------------------------------------------------------------------------------------------------------
29,736 British Petroleum PLC ADR (United Kingdom) 2,226,483
6,500 ENI SPA ADR (Italy) 372,125
22,600 Exxon Corp. 1,389,900
33,000 Halliburton Co. 2,615,250
65,200 Mobil Corp. 4,555,850
17,100 Schlumberger Ltd. 2,137,500
75,627 Total Corp. ADR (France) 3,828,617
--------------
17,125,725
Paper and Forest Products (0.3%)
- ------------------------------------------------------------------------------------------------------------
10,200 Temple Inland, Inc. 550,800
55,200 Unisource Worldwide, Inc. + 883,200
26,700 Weyerhaeuser Co. 1,388,400
--------------
2,822,400
Pharmaceuticals and Biotechnology (4.7%)
- ------------------------------------------------------------------------------------------------------------
42,200 Bristol-Myers Squibb Co. 3,418,200
69,867 Dura Pharmaceuticals, Inc. + 2,785,947
80,241 Gilead Sciences, Inc. + 2,216,658
43,678 Jones Medical Industries, Inc. 2,074,705
25,100 Lilly (Eli) & Co. 2,743,744
43,018 Medicis Pharmaceutical Corp. Class A + 2,145,523
24,652 Merck & Co., Inc. 2,551,482
3,950 Novartis AG ADR (Switzerland) 6,310,699
57,372 Parexel International Corp. + 1,821,561
50,300 Pfizer, Inc. 6,010,850
77,842 Pharmacia & Upjohn, Inc. 2,705,010
27,800 Quintiles Transnational Corp. + 1,935,575
5,000 Schwarz Pharamaceutical AG ADR (Germany) + 377,115
6,100 Sepracor, Inc. + 157,456
24,800 Smithkline Beecham PLC ADR (United Kingdom) 2,272,300
44,585 Vertex Pharmaceuticals, Inc. + 1,705,376
4,100 Warner-Lambert Co. 509,425
--------------
41,741,626
Photography (0.7%)
- ------------------------------------------------------------------------------------------------------------
34,329 Eastman Kodak Co. 2,634,751
60,800 Polaroid Corp. 3,374,400
--------------
6,009,151
Publishing (1.8%)
- ------------------------------------------------------------------------------------------------------------
78,600 Deluxe Corp. 2,682,225
7,000 Gannett Co., Inc. 691,250
28,900 Harcourt General, Inc. 1,376,363
36,500 Tribune Co. 1,754,281
79,301 Wolters Kluwer N.V. (Netherlands) 9,662,965
--------------
16,167,084
Railroads (0.1%)
- ------------------------------------------------------------------------------------------------------------
8,600 Burlington Northern Santa Fe Corp. + 772,925
Restaurants (1.4%)
- ------------------------------------------------------------------------------------------------------------
29,600 Applebee's International, Inc. 791,800
42,950 Cracker Barrel Old Country Store, Inc. 1,138,175
49,844 J.D. Wetherspoon PLC (United Kingdom) 1,130,335
174,420 Landry's Seafood Restaurants, Inc. + 4,011,660
56,070 Papa Johns International, Inc. + 2,060,573
272,020 PizzaExpress PLC (United Kingdom) 2,847,798
--------------
11,980,341
Retail (8.1%)
- ------------------------------------------------------------------------------------------------------------
74,694 Bed Bath & Beyond, Inc. + 2,268,830
119,240 CompUSA, Inc. + 2,563,660
357,522 Costco Companies, Inc. + 11,753,536
55,085 CVS Corp. 2,823,106
52,500 Dayton Hudson Corp. 2,792,344
394,988 Dixons Group PLC (United Kingdom) 3,070,142
36,200 Dollar General Corp. 1,357,500
52,758 Dollar Tree Stores, Inc. + 2,657,684
51,200 Federated Department Stores, Inc. + 1,779,200
94,250 General Nutrition Companies, Inc. + 2,639,000
24,617 Global DirectMail Corp. + 641,581
26,500 Home Depot, Inc. (The) 1,826,844
151,057 Kohls Corp. + 7,996,580
32,620 Payless Shoesource, Inc. + 1,783,906
67,413 Petco Animal Supplies, Inc. + 2,022,390
13,600 Rexall Sundown, Inc. + 530,400
43,600 Rite Aid Corp. 2,174,550
307,371 Staples, Inc. + 7,146,376
270,751 Starbucks Corp. + 10,542,367
56,000 TJX Cos., Inc. (The) 1,477,000
45,000 Wolverine World Wide, Inc. 1,366,875
--------------
71,213,871
Satellite Services (0.4%)
- ------------------------------------------------------------------------------------------------------------
112,300 PanAmSat Corp. + 3,256,700
Semiconductors (4.7%)
- ------------------------------------------------------------------------------------------------------------
123,261 Applied Materials, Inc. + 8,728,420
49,606 CFM Technologies, Inc. + 1,624,597
80,748 Credence Systems Corp. + 2,417,393
67,336 KLA Instruments Corp. + 3,282,630
18,768 Lattice Semiconductor Corp. + 1,060,392
163,227 Linear Technology Corp. 8,446,997
135,033 Maxim Integrated Products Inc. + 7,680,002
59,300 National Semiconductor Corp. + 1,816,063
33,526 Photronics, Inc. + 1,600,867
20,800 Texas Instruments, Inc. 1,748,500
51,616 Xilinx, Inc. + 2,532,410
--------------
40,938,271
Specialty Consumer Products (1.1%)
- ------------------------------------------------------------------------------------------------------------
747,400 Bulgari S.P.A. (Italy) 4,235,622
59,352 Central Garden and Pet Co. + 1,483,800
78,043 Fastenal Co. 3,824,107
--------------
9,543,529
Supermarkets (0.3%)
- ------------------------------------------------------------------------------------------------------------
3,150 Carrefour Supermarche SA (France) 2,288,180
Telecommunication Equipment (1.6%)
- ------------------------------------------------------------------------------------------------------------
111,898 Advanced Fibre Communications + 6,755,842
31,100 Natural Microsystems Corp. + 1,119,600
49,525 Pairgain Technologies, Inc. + 767,638
40,800 Qwest Communications International, Inc. + 1,111,800
78,122 Tellabs, Inc. + 4,365,067
--------------
14,119,947
Telephone Services (1.3%)
- ------------------------------------------------------------------------------------------------------------
48,707 IXC Communications, Inc. + 1,278,559
55,575 MCI Communications Corp. 2,127,480
55,391 McLeod, Inc. Class A + 1,869,446
8,800 SBC Communications, Inc. 544,500
50,400 Sprint Corp. 2,652,300
63,730 Tel-Save Holdings, Inc. + 971,883
62,887 WorldCom, Inc. + 2,012,384
--------------
11,456,552
Textiles (0.2%)
- ------------------------------------------------------------------------------------------------------------
68,250 Wolford AG ADR (Austria) 1,324,808
Tobacco (0.2%)
- ------------------------------------------------------------------------------------------------------------
51,100 UST, Inc. 1,418,025
Trucking (0.1%)
- ------------------------------------------------------------------------------------------------------------
17,150 Ryder System, Inc. 565,950
Wireless Communications (0.8%)
- ------------------------------------------------------------------------------------------------------------
3,600 AirTouch Communications, Inc. + 98,550
382,112 NEXTEL Communications, Inc. Class A + 7,236,246
--------------
7,334,796
--------------
Total Common Stocks (cost $705,215,744) $ 856,787,724
PREFERRED STOCKS (0.6%) *
NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
9,878 Fresenius Medical Care AG Ser. D, $9.00 pfd.
(Germany) $ 2,243,584
13,689 Marschollek, Lautenschlaeger und Partner AG,
$2.95 pfd. (Germany) 3,258,351
--------------
Total Preferred Stocks (cost $3,327,782) $ 5,501,935
UNITS (0.1%) * (cost $480,019)
NUMBER OF UNITS VALUE
- ------------------------------------------------------------------------------------------------------------
27,629 ThermoLase Corp., + $ 480,019
SHORT-TERM INVESTMENTS (1.4%) * (cost $12,126,987)
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$12,125,000 Interest in $ 293,634,000 joint repurchase agreement
dated June 30, 1997 with UBS Securities due
July 1, 1997 with respect to various U.S. Treasury
obligations -- maturity value of $12,126,987 for an
effective yield of 5.90% $ 12,126,987
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $721,150,532) *** $ 874,896,665
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $877,530,387.
*** The aggregate identified cost on a tax basis is $725,347,551, resulting in gross unrealized appreciation
and depreciation of $177,358,658 and $27,809,544, respectively, or net unrealized appreciation of
$149,549,114.
+ Non-income-producing security.
ADR or ADS after the name of a foreign holding stands for American Depository Receipts or American
Depository respectively, representing ownership of foreign securities on deposit with a domestic
custodian bank.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
June 30, 1997 (Unaudited)
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $721,150,532) (Note 1) $874,896,665
- ---------------------------------------------------------------------------------------------------
Dividends, and other receivables 233,239
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 7,988,043
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 4,936,039
- ---------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 2,661
- ---------------------------------------------------------------------------------------------------
Total assets 888,056,647
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 266
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 6,045,524
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 2,103,214
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,306,595
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 263,022
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 9,151
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 3,258
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 637,899
- ---------------------------------------------------------------------------------------------------
Payable for organization expenses (Note 1) 17,221
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 140,110
- ---------------------------------------------------------------------------------------------------
Total liabilities 10,526,260
- ---------------------------------------------------------------------------------------------------
Net assets $877,530,387
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $776,956,065
- ---------------------------------------------------------------------------------------------------
Accumulated net investment loss (Note 1) (3,278,970)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and
foreign currency transactions (Note 1) (49,893,856)
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 153,747,148
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $877,530,387
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($434,527,565 divided by 25,691,018 shares) $16.91
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $16.91)* $17.94
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($397,565,988 divided by 23,825,310 shares)** $16.69
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($45,436,834 divided by 2,707,933 shares) $16.78
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $16.78)* $17.39
- ---------------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the
offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent deferred
sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended June 30, 1997 (Unaudited)
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $40,249) $ 2,119,429
- --------------------------------------------------------------------------------------------------
Interest 542,283
- --------------------------------------------------------------------------------------------------
Total investment income 2,661,712
- --------------------------------------------------------------------------------------------------
Expenses:
Compensation of Manager (Note 2) 2,548,549
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,046,141
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 20,446
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 6,479
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 471,878
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 1,745,428
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 149,112
- --------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 1,773
- --------------------------------------------------------------------------------------------------
Reports to shareholders 53,250
- --------------------------------------------------------------------------------------------------
Registration fees 31,610
- --------------------------------------------------------------------------------------------------
Auditing 14,769
- --------------------------------------------------------------------------------------------------
Legal 6,909
- --------------------------------------------------------------------------------------------------
Other 76,573
- --------------------------------------------------------------------------------------------------
Total expenses 6,172,917
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (232,235)
- --------------------------------------------------------------------------------------------------
Net expenses 5,940,682
- --------------------------------------------------------------------------------------------------
Net investment loss (3,278,970)
- --------------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (23,350,807)
- --------------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (303)
- --------------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and
liabilities in foreign currencies during the period (360)
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 97,194,389
- --------------------------------------------------------------------------------------------------
Net gain on investments 73,842,919
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $70,563,949
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
June 30 December 31
1997* 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment loss $ (3,278,970) $ (4,885,333)
- ----------------------------------------------------------------------------------------------------------------------
Net realized loss on investments (23,351,110) (26,250,110)
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments
and assets and liabilities in foreign currencies 97,194,029 45,938,456
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 70,563,949 14,803,013
- ----------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 93,111,550 542,433,413
- ----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 163,675,499 557,236,426
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of period 713,854,888 156,618,462
- ----------------------------------------------------------------------------------------------------------------------
End of period (including accumulated net investment
loss of $3,278,970, and $--, respectively) $877,530,387 $713,854,888
- ----------------------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ----------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share June 30 Apr. 14, 1993+
operating performance (Unaudited) Year ended December 31 to Dec. 31
- ----------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $15.51 $14.40 $9.75 $10.29 $8.50
- ----------------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------------
Net investment loss (.04) (.11)(d) (.01)(b)(d) (.02)(b)(d) -- (b)(d)
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.44 1.22 4.88 .05 1.95
- ----------------------------------------------------------------------------------------------------------------------
Total from
investment activities 1.40 1.11 4.87 .03 1.95
- ----------------------------------------------------------------------------------------------------------------------
Less distributions
- ----------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- -- (.01) --
- ----------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- -- (.10) -- --
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- (.12) (.56) (.16)
- ----------------------------------------------------------------------------------------------------------------------
Total distributions -- -- (.22) (.57) (.16)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $16.91 $15.51 $14.40 $9.75 $10.29
- ----------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 9.03 * 7.71 50.14 0.34 22.98 *
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $434,528 $348,261 $83,526 $3,190 $2,895
- ----------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(e) .62 * 1.44 1.31 (b) .92 (b) .72 (b)*
- ----------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.24)* (.69) (.28)(b) (.18)(b) (.04)(b)*
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 37.69 * 68.95 49.81 101.94 76.02
- ----------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0479 $.0487
- ----------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Reflects an expense limitation which expired on December 31, 1995. As a result of such limitation,
expenses of the fund for the period ended December 31, 1993 and the year ended December 31,
1994, reflect a per share reduction of approximately $0.11 and $0.16, respectively. Expenses for the
period ended December 31, 1995 for class A, B and M shares reflect a per share reduction of
$0.04, $0.04 and $0.03, respectively.
(c) Average commission rate paid on security trades is required for fiscal periods beginning on or after
September 1, 1995.
(d) Per share net investment loss has been determined on the basis of the weighted average
number of shares outstanding during the period.
(e) The ratio of expenses to average net assets for the year ended December 31, 1995 and thereafter,
include amounts paid through brokerage service and expense offset arrangements. Prior period
ratios exclude these amounts. (Note 2)
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- --------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share June 30 Year ended Oct. 2, 1995+
operating performance (Unaudited) Dec. 31 to Dec. 31
- --------------------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $15.36 $14.37 $13.08
- --------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------
Net investment loss (.09) (.22)(d) (.04)(b)(d)
- --------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.42 1.21 1.40
- --------------------------------------------------------------------------------------------
Total from
investment activities 1.33 .99 1.36
- --------------------------------------------------------------------------------------------
Less distributions
- --------------------------------------------------------------------------------------------
From net
investment income -- -- --
- --------------------------------------------------------------------------------------------
In excess of net
investment income -- -- (.03)
- --------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- (.04)
- --------------------------------------------------------------------------------------------
Total distributions -- -- (.07)
- --------------------------------------------------------------------------------------------
Net asset value,
end of period $16.69 $15.36 $14.37
- --------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 8.66 * 6.89 10.41 *
- --------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $397,566 $328,268 $66,978
- --------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(e) .99 * 2.19 .54 (b)*
- --------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.62)* (1.45) (.29)(b)*
- --------------------------------------------------------------------------------------------
Portfolio turnover (%) 37.69 * 68.95 49.81
- --------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0479 $.0487
- --------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Reflects an expense limitation which expired on December 31, 1995. As a result of such limitation,
expenses of the fund for the period ended December 31, 1993 and the year ended December 31,
1994, reflect a per share reduction of approximately $0.11 and $0.16, respectively. Expenses for the
period ended December 31, 1995 for class A, B and M shares reflect a per share reduction of
$0.04, $0.04 and $0.03, respectively.
(c) Average commission rate paid on security trades is required for fiscal periods beginning on or after
September 1, 1995.
(d) Per share net investment loss has been determined on the basis of the weighted average
number of shares outstanding during the period.
(e) The ratio of expenses to average net assets for the year ended December 31, 1995 and thereafter,
include amounts paid through brokerage service and expense offset arrangements. Prior period
ratios exclude these amounts. (Note 2)
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ---------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share June 30 Year ended Oct. 2, 1995+
operating performance (Unaudited) Dec. 31 to Dec. 31
- ---------------------------------------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $15.42 $14.39 $13.08
- ---------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------
Net investment loss (.07) (.19)(d) -- (b)(d)
- ---------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.43 1.22 1.38
- ---------------------------------------------------------------------------------------------------------
Total from
investment activities 1.36 1.03 1.38
- ---------------------------------------------------------------------------------------------------------
Less distributions
- ---------------------------------------------------------------------------------------------------------
From net
investment income -- -- --
- ---------------------------------------------------------------------------------------------------------
In excess of net
investment income -- -- (.03)
- ---------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- (.04)
- ---------------------------------------------------------------------------------------------------------
Total distributions -- -- (.07)
- ---------------------------------------------------------------------------------------------------------
Net asset value,
end of period $16.78 $15.42 $14.39
- ---------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 8.82 * 7.16 10.57 *
- ---------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $45,437 $37,325 $6,115
- ---------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(e) .87 * 1.94 .47 (b)*
- ---------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.49)* (1.20) (.21)(b)*
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 37.69 * 68.95 49.81
- ---------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0479 $.0487
- ---------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Reflects an expense limitation which expired on December 31, 1995. As a result of such limitation,
expenses of the fund for the period ended December 31, 1993 and the year ended December 31,
1994, reflect a per share reduction of approximately $0.11 and $0.16, respectively. Expenses for the
period ended December 31, 1995 for class A, B and M shares reflect a per share reduction of
$0.04, $0.04 and $0.03, respectively.
(c) Average commission rate paid on security trades is required for fiscal periods beginning on or after
September 1, 1995.
(d) Per share net investment loss has been determined on the basis of the weighted average
number of shares outstanding during the period.
(e) The ratio of expenses to average net assets for the year ended December 31, 1995 and thereafter,
include amounts paid through brokerage service and expense offset arrangements. Prior period
ratios exclude these amounts. (Note 2)
</TABLE>
Notes to financial statements
June 30, 1997 (Unaudited)
Note 1
Significant accounting policies
The Putnam Voyager Fund II ("the fund") is registered under the Investment
Company Act of 1940, as amended, as a diversified open-end management
investment company. The fund seeks long-term growth of capital by investing in
primarily a portfolio of common stocks.
The fund offers class A, class B and class M shares. Class A shares are sold
with a maximum front-end sales charge of 5.75%. Class B shares, which convert
to class A shares after approximately eight years, do not pay a front-end
sales charge, but pay a higher ongoing distribution fee than class A shares,
and are subject to a contingent deferred sales charge, if those shares are
redeemed within six years of purchase. Class M shares are sold with a maximum
front-end sales charge of 3.50% and pay an ongoing distribution fee that is
lower than class B shares and higher than class A shares.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class (including
the distribution fees applicable to such class). Each class votes as a class
only with respect to its own distribution plan or other matters on which a
class vote is required by law or determined by the Trustees. Shares of each
class would receive their pro-rata share of the net assets of the fund, if the
fund were liquidated. In addition, the Trustees declare separate dividends on
each class of shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with generally accepted
accounting principles and requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities. Actual
results could differ from those estimates.
A) Security valuation Investments for which market quotations are readily
available are stated at market value, which is determined using the last
reported sale price, or, if no sales are reported -- as in the case of some
securities traded over-the-counter -- the last reported bid price. Short-term
investments having remaining maturities of 60 days or less are stated at
amortized cost which approximates market, and other investments are stated at
fair value following procedures approved by the Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account along with the cash of other registered
investment companies and certain other accounts managed by Putnam Investment
Management, Inc. ("Putnam Management"), the fund's Manager, a wholly-owned
subsidiary of Putnam Investments, Inc.. These balances may be invested in one
or more repurchase agreements and/or short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through its
custodian, receives delivery of the underlying securities, the market value of
which at the time of purchase is required to be in an amount at least equal to
the resale price, including accrued interest. Putnam Management is responsible
for determining that the value of these underlying securities is at all times
at least equal to the resale price, including accrued interest.
D) Security transactions and related investment income Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed).
Interest income is recorded on the accrual basis. Dividend income is recorded
on the ex-dividend date except that certain dividends from foreign securities
are recorded as soon as the fund is informed of the ex-dividend date.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities, currency
holdings, other assets and liabilities are recorded in the books and records
of the fund after translation to U.S. dollars based on the exchange rates on
that day. The cost of each security is determined using historical exchange
rates. Income and withholding taxes are translated at prevailing exchange
rates when accrued or incurred. The fund does not isolate that portion of
realized or unrealized gains or losses resulting from changes in the foreign
exchange rate on investments from fluctuations arising from changes in the
market prices of the securities. Such fluctuations are included with the net
realized and unrealized gain or loss on investments. Net realized gains and
losses on foreign currency transactions represent net exchange gains or losses
on closed forward currency contracts, disposition of foreign currencies and
the difference between the amount of investment income and foreign withholding
taxes recorded on the fund's books and the U.S. dollar equivalent amounts
actually received or paid. Net unrealized appreciation and depreciation of
assets and liabilities in foreign currencies arise from changes in the value
of open forward currency contracts and assets and liabilities other than
investments at the period end, resulting from changes in the exchange rate.
F) Federal taxes It is the policy of the fund to distribute all of its taxable
income within the prescribed time and otherwise comply with the provisions of
the Internal Revenue Code applicable to regulated investment companies. It is
also the intention of the fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code
of 1986, as amended. Therefore, no provision has been made for federal taxes
on income, capital gains or unrealized appreciation on securities held nor for
excise tax on income and capital gains.
At December 31, 1996, the fund had a capital loss carryover of approximately
$19,033,000 available to offset future net capital gain, if any, which will
expire on December 31, 2004.
G) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date. Capital
gain distributions, if any, are recorded on the ex-dividend date and paid at
least annually. The amount and character of income and gains to be distributed
are determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. Reclassifications are made to the
fund's capital accounts to reflect income and gains available for distribution
(or available capital loss carryovers) under income tax regulations.
H) Unamortized organization expenses Expenses incurred by the fund in
connection with its organization, its registration with the Securities and
Exchange Commission and with various states and the initial public offering of
its shares were $17,221. These expenses are being amortized on projected net
asset levels over a five-year period. The fund will reimburse Putnam
Management for the payment of these expenses.
Note 2
Management fee, administrative services, and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund. Such
fee is based on the following annual rates: 0.70% of the first $500 million of
average net assets, 0.60% of the next $500 million, 0.55% of the next $500
million, 0.50% of the next $5 billion, 0.475% of the next $5 billion, 0.455%
of the next $5 billion, 0.44 % of the next $5 billion and 0.43% of any excess
thereafter.
As part of the custodian contract between the subcustodian bank and PFTC, the
subcustodian bank has a lien on the securities of the fund to the extent
permitted by the funds investment restrictions to cover any advances made by
the subcustodian bank for the settlement of securities purchased by the fund.
At June 30, 1997, the payable to the subcustodian bank represents the amount
due for cash advance for the settlement of a security purchased.
The fund reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Trustees of the fund receive an annual Trustees fee of $1,450 and an
additional fee for each Trustee's meeting attended. Trustees who are not
interested persons of Putnam Management and who serve on committees of the
Trustees receive additional fees for attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Plan") which allows the
Trustees to defer the receipt of all or a portion of Trustees Fees payable on
or after July 1, 1995. The deferred fees remain in the fund and are invested
in certain Putnam funds until distribution in accordance with the Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan
(the "Pension Plan") covering all Trustees of the fund who have served as
Trustee for at least five years. Benefits under the Pension Plan are equal to
50% of the Trustee's average total retainer and meeting fees for the three
years preceding retirement. Pension expense for the fund is included in
Compensation of trustees in the Statement of operations. Accrued pension
liability is included in Payable for compensation of Trustees in the Statement
of assets and liabilities.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a wholly-owned subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the six months ended June 30, 1997, fund expenses were reduced by $232,235
under expense offset arrangements with PFTC and brokerage service
arrangements. Investor servicing and custodian fees reported in the Statement
of operations exclude these credits. The fund could have invested a portion of
the assets utilized in connection with the expense offset arrangements in an
income producing asset if it had not entered into such arrangements.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to compensate
Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments
Inc., for services provided and expenses incurred by it in distributing shares
of the fund. The Plans provide for payments by the fund to Putnam Mutual
Funds Corp. at an annual rate up to 0.35%, 1.00% and 1.00% of the average net
assets attributable to class A, class B and class M shares, respectively. The
Trustees have approved payment by the fund at an annual rate of 0.25%, 1.00%
and 0.75% of the average net assets attributable to class A, class B and class
M shares respectively.
For the six months ended June 30, 1997, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $341,642 and $23,747 from the sale of
class A and class M shares, respectively and $412,002 in contingent deferred
sales charges from redemptions of class B shares. A deferred sales charge of
up to 1% is assessed on certain redemptions of class A shares. For the six
months ended June 30, 1997, Putnam Mutual Funds Corp., acting as underwriter
received $11,780 on class A redemptions.
Note 3
Purchases and sales of securities
During the six months ended June 30, 1997, purchases and sales of investment
securities other than short-term investments aggregated $367,688,130 and
$284,912,594, respectively. There were no purchases and sales of U.S.
government obligations. In determining the net gain or loss on securities
sold, the cost of securities has been determined on the identified cost basis.
Note 4
Capital shares
At June 30, 1997, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended
June 30, 1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 12,581,625 $196,825,630
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- ------------------------------------------------------------
12,581,625 196,825,630
Shares
repurchased (9,345,797) (146,287,923)
- ------------------------------------------------------------
Net increase 3,235,828 $50,537,707
- ------------------------------------------------------------
Year ended
December 31, 1996
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 27,332,602 $421,525,389
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- ------------------------------------------------------------
27,332,602 421,525,389
Shares
repurchased (10,677,327) (165,799,580)
- ------------------------------------------------------------
Net increase 16,655,275 $255,725,809
- ------------------------------------------------------------
Six months ended
June 30, 1997
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 4,963,119 $76,258,249
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- ------------------------------------------------------------
4,963,119 76,258,249
Shares
repurchased (2,511,250) (38,246,195)
- ------------------------------------------------------------
Net increase 2,451,869 $38,012,054
- ------------------------------------------------------------
Year ended
December 31, 1996
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 18,258,918 $279,772,492
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- ------------------------------------------------------------
18,258,918 279,772,492
Shares
repurchased (1,545,949) (23,794,078)
- ------------------------------------------------------------
Net increase 16,712,969 $255,978,414
- ------------------------------------------------------------
Six months ended
June 30, 1997
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 821,157 $12,667,988
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- ------------------------------------------------------------
821,157 12,667,988
Shares
repurchased (533,593) (8,106,199)
- ------------------------------------------------------------
Net increase 287,564 $4,561,789
- ------------------------------------------------------------
Year ended
December 31, 1996
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 2,357,042 $36,329,365
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- ------------------------------------------------------------
2,357,042 36,329,365
Shares
repurchased (361,673) (5,600,175)
- ------------------------------------------------------------
Net increase 1,995,369 $30,729,190
- ------------------------------------------------------------
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Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
John J. Morgan, Jr.
Vice President
Roland W. Gillis
Vice President and Fund Manager
Charles H. Swanberg
Vice President and Fund Manager
Robert R. Beck
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Voyager Fund II.
It may also be used as sales literature when preceded or accompanied by the
current prospectus, which gives details of sales charges, investment
objectives, and operating policies of the fund, and the most recent copy of
Putnam's Quarterly Performance Summary. For more information, or to request a
prospectus, call toll free: 1-800-225-1581. You can also learn more at Putnam
Investments' website: http://www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed or
endorsed by, any financial institution, are not insured by the Federal Deposit
Insurance Corporation (FDIC), the Federal Reserve Board or any other agency,
and involve risk, including the possible loss of principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- --------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- --------------------
AN017 35092-377/2AR/2AO 8/97
